Bitwise 10 Crypto Index ETF 10-Q for FY2022 Q3
Bitwise 10 Crypto Index ETF (BITW)
About this 10-Q
Bitwise 10 Crypto Index ETF filed this 10-Q on November 4, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $31.65M
- down 84.6% from net income of $206.08M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from to
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(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Bitwise 10 Crypto Index Fund (BITW) Shares
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Number of shares of the registrant’s common stock outstanding as of September 30, 2022:
Table of Contents
Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” with respect to the financial conditions, results of operations, plans, objectives, future performance and business of Bitwise 10 Crypto Index Fund (BITW) (the “Trust”). Statements preceded by, followed by or that include words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other similar expressions are intended to identify some of the forward-looking statements. All statements (other than statements of historical fact) included in this Quarterly Report that address activities, events or developments that will or may occur in the future, including such matters as changes in market prices and conditions, the Trust’s operations, the plans of Bitwise Investment Advisers, LLC (the “Sponsor”) and references to the Trust’s future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially from such statements. These statements are based upon certain assumptions and analyses the Sponsor made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor’s expectations and predictions, however, is subject to a number of risks and uncertainties, including, but not limited to, those described in Part II, Item 1A. Risk Factors. Forward-looking statements are made based on the Sponsor’s beliefs, estimates and opinions on the date the statements are made and neither the Trust nor the Sponsor is under a duty or undertakes an obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, other than as required by applicable laws. Investors are therefore cautioned against relying on forward-looking statements. Factors which could have a material adverse effect on the Trust's business, financial condition or results of operations and future prospects or which could cause actual results to differ materially from the Trust's expectations include, but are not limited to:
• the extreme volatility of trading prices that many crypto assets, including Bitcoin, have experienced in recent periods and may continue to experience, which could have a material adverse effect on the value of the shares of the Trust;
• the recentness of the development of crypto assets and the uncertain medium-to-long term value of the shares of the Trust due to a number of factors relating to the capabilities and development of blockchain technologies and to the fundamental investment characteristics of crypto assets;
• the value of the shares of the Trust depending on the acceptance of crypto assets and blockchain technology, a new and rapidly evolving industry;
• the unregulated nature and lack of transparency surrounding the operations of blockchain technologies, cryptocurrencies, and digital assets, which may adversely affect the value of the group of selected cryptocurrencies that are held by the Trust ("Portfolio Crypto Assets") and the shares of the Trust;
• the limited history of the Index (as defined herein);
• risks related to the COVID-19 pandemic, which could negatively impact the value of the Trust’s holdings and significantly disrupt its operations;
• the possibility that the shares of the Trust may trade at a price that is at, above or below the Trust’s NAV Per Share as a result of the non-current trading hours between OTCQX and markets for the Portfolio Crypto Assets;
• regulatory changes or actions by the U.S. Congress or any U.S. federal or state agencies that may affect the value of the Shares or restrict the use of one or more crypto assets, mining activity or the operation of their networks or the markets for the Portfolio Crypto Assets in a manner that adversely affects the value of the shares of the Trust;
• changes in the policies of the U.S. Securities and Exchange Commission (the “SEC”) that could adversely impact the value of the shares of the Trust;
• the possibility that the Trust or the Sponsor could be subject to regulation as a money service business or money transmitter, which could result in extraordinary expenses to the Trust or the Sponsor and also result in decreased liquidity for the Shares;
• regulatory changes or interpretations that could obligate the Trust or the Sponsor to register and comply with new regulations, resulting in potentially extraordinary, nonrecurring expenses to the Trust;
• potential delays in mail reaching the Sponsor when sent to the Trust at its registered office;
• possible requirements for the Trust to disclose information, including information relating to investors, to regulators;
i
• potential conflicts of interest that may arise among the Sponsor or its affiliates and the Trust;
• the potential discontinuance of the Sponsor’s continued services, which could be detrimental to the Trust;
• the possible resignation or removal of the Custodian (as defined herein) by the Sponsor; and
• additional risk factors discussed in Part II, Item 1A. Risk Factors and Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q, as well as those described from time to time in our future reports filed with the SEC.
Unless otherwise stated or the context otherwise requires, the terms “we,” “our” and “us” in this Quarterly Report on Form 10-Q refer to the Sponsor acting on behalf of the Trust.
ii
Industry and Market Data
Although we are responsible for all disclosure contained in this Quarterly Report on Form 10-Q, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable. Market estimates are calculated by using independent industry publications in conjunction with our assumptions regarding the digital asset industry and market. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the heading “Statement Regarding Forward-Looking Statements.”
iii
PART I – FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
Bitwise 10 Crypto Index Fund
(formerly known as Bitwise 10 Private Index Fund, LLC)
Financial Statements (Unaudited)
September 30, 2022 and September 30, 2021
1
Bitwise 10 Crypto Index Fund
Table of Contents
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Financial Statements (Unaudited) |
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2
Bitwise 10 Crypto Index Fund
Statements of Financial Condition
September 30, 2022 (unaudited) and December 31, 2021
Assets |
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September 30, 2022 |
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December 31, 2021 |
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Investments in digital assets, at fair value (cost $ |
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Cash |
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Other assets |
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Total Assets |
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Liabilities |
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Management fees payable |
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$ |
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Subscriptions received in advance |
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Capital redemptions payable |
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Total Liabilities |
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Net Assets |
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$ |
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Net Assets consists of: |
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Paid-in-capital |
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Accumulated net investment loss |
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Accumulated net realized gain (loss) on investments in digital assets |
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Net unrealized appreciation on investments in digital assets |
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Net Assets |
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$ |
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$ |
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Shares issued and outstanding, |
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Net asset value per share |
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$ |
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$ |
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See accompanying notes to financial statements (unaudited).
3
Bitwise 10 Crypto Index Fund
Schedules of Investments
September 30, 2022 (unaudited)
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Fair Value |
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Percentage of Net Assets |
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Investments in digital assets, at fair value |
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Bitcoin |
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$ |
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Ethereum |
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Cardano |
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Solana |
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Polkadot |
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Polygon |
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Avalanche |
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Litecoin |
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Cosmos |
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Chainlink |
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Total investments in digital assets, at fair value |
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$ |
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Other assets in excess of liabilities |
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Net Assets |
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$ |
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December 31, 2021
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Fair Value |
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Percentage of Net Assets |
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Investments in digital assets, at fair value |
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Bitcoin |
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$ |
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Ethereum |
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Solana |
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Cardano |
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Polygon |
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Algorand |
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Litecoin |
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Chainlink |
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Bitcoin Cash |
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Avalanche |
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Uniswap |
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Total investments in digital assets, at fair value |
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$ |
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Other assets in excess of liabilities |
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Net Assets |
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$ |
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See accompanying notes to financial statements (unaudited).
4
Bitwise 10 Crypto Index Fund
Statements of Operations (Unaudited)
For the three and nine months ended September 30, 2022 and 2021
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Three months ended September 30, |
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Nine months ended September 30, |
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2021 |
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2022 |
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2021 |
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Expenses |
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Management fees |
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Transaction and other fees |
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Total Expenses |
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Net Investment loss |
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Net realized and change in unrealized gain (loss) on |
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Net realized gain (loss) from digital assets |
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Net change in unrealized appreciation (depreciation) |
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Net realized and change in unrealized gain (loss) on investments |
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Net increase (decrease) in Net Assets resulting from |
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$ |
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$ |
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See accompanying notes to financial statements (unaudited).
5
Bitwise 10 Crypto Index Fund
Statement of Changes in Net Assets (Unaudited)
For the three and nine months ended September 30, 2022 and 2021
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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Increase in net assets from operations: |
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Net investment loss |
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Net realized gain (loss) from digital assets |
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Net change in unrealized appreciation (depreciation) from digital assets |
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Net increase (decrease) in net assets resulting from operations |
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Increase in net assets from capital share |
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Subscriptions |
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Net increase in net assets resulting |
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Total increase (decrease) in net assets from operations and capital share transactions |
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Net Assets: |
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Beginning of Period |
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End of Period |
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Change in Shares outstanding: |
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Shares outstanding at beginning of period |
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Subscriptions |
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Net increase (decrease) in shares |
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Shares outstanding at end of period |
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See accompanying notes to financial statements (unaudited).
6
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
1. Organization
Bitwise 10 Crypto Index Fund (the “Trust”) is a Delaware Statutory Trust that commenced operations on November 22, 2017. The Trust’s name was changed from “Bitwise Hold 10 Private Index Fund, LLC” on September 24, 2018, and changed again from “Bitwise 10 Private Index Fund, LLC” on May 1, 2020 when it was also simultaneously converted from a Delaware Limited Liability Company to a Delaware Statutory Trust. Bitwise Investment Advisers, LLC, is the sponsor (“Sponsor”) and investment adviser of the Trust. Bitwise Asset Management, Inc, an affiliate of the Sponsor, served as the Manager before the Trust’s conversion to a Delaware Statutory Trust. Delaware Trust Company is the Trustee of the Trust, and American Stock Transfer & Trust Company is the Transfer Agent of the Trust.
On December 9, 2020, the Trust received notice that its Shares were qualified for public trading on the OTCQX U.S. Marketplace of the OTC Markets Group, Inc. (“OTCQX”). The Trust’s trading symbol on OTCQX is “BITW” and the CUSIP number for its Shares is
The Trust’s principal investment objective is to invest in a Portfolio of cryptocurrencies that tracks the Bitwise 10 Large Cap Crypto Index (the "Index") as closely as possible with certain exceptions determined by the Sponsor in its sole discretion. The Trust rebalances monthly alongside the Index to stay current with changes. The Trust and the Sponsor have entered into a limited, non-exclusive, revocable license agreement with Bitwise Index Services, LLC (the “Index Provider”), an affiliate of the Trust that is controlled by the same parent entity as the Sponsor
All shareholders are subject to a
Theorem Fund Services, LLC (the “Administrator”) serves as the Trust’s Administrator and performs certain administrative and accounting services on behalf of the Trust.
7
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
2. Significant Accounting Policies
Basis of Presentation
The financial statements are expressed in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Trust is an investment company and follows the specialized accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or “Codification”) Topic 946, Financial Services—Investment Companies.
The accompanying comparative financial statements are unaudited, but in the opinion of management of the Sponsor, contain all adjustments (which include normal recurring adjustments) considered necessary to present fairly the financial position of the Trust as of September 30, 2022 and December 31, 2021 and the results of operations for the three and nine months ended September 30, 2022 and 2021. These interim financial statements should be read in conjunction with the Trust’s annual report on Form 10-K for the year ended December 31, 2021. Interim period results are not necessarily indicative of results for a full-year period.
Pursuant to the Statement of Cash Flows Topic of the Codification, the Trust qualifies for an exemption from the requirement to provide a statement of cash flows and has elected not to provide a statement of cash flows.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash represents cash deposits held at financial institutions and digital asset exchanges. Cash in a bank deposit account, at times, may exceed U.S. federally insured limits. The Trust has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on such bank deposits.
Investments and Valuation
The Trust’s investments in digital assets are stated at fair value. For a further discussion of the Trust’s calculations of valuation, please see “Calculation of Valuation” in the footnote below. Digital assets are generally valued using prices as reported on reputable and liquid exchanges and may utilize an average of bid and ask quotes using closing prices provided by such exchanges as of the date and time of determination ("Calculation of Valuation" below). Factors such as the recent stability of the exchange, current liquidity of the exchange, and recent price activity of an exchange will be considered in the determination of which exchanges to utilize.
Digital asset transactions are recorded on the trade date. Realized gains and losses from digital asset transactions are determined using the identified cost method. Any change in net unrealized gain or loss is reported in the statement of operations. Commissions and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction.
Calculation of Valuation
For all periods through the quarterly period ended September 30, 2021, the NAV Per Share, the NAV of the Trust, and the fair valuations for each Portfolio Crypto Asset were calculated by the Trust’s Administrator in reliance on the fair value of each Portfolio Crypto Asset based on a blended average approach for calculating the price of a digital asset (the "Blended Bitwise Crypto Asset Price"), which the Sponsor was responsible for calculating. The Sponsor provided this price to the Administrator, and the Administrator used this price (multiplied by the Trust’s holdings) for each asset to determine the fair value of the Trust’s assets. The Administrator then subtracted the Trust’s liabilities to determine the Trust’s NAV. The Administrator then divided this value by the
8
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
Trust’s shares outstanding in order to determine the NAV per share. As a result of the Sponsor’s responsibility in this regard, any errors, discontinuance or changes in such valuation calculations may have had an adverse effect on the value of the Shares. The Sponsor instituted this valuation policy in order to generate fair value estimates because it determined that such policy was in the best interest of shareholders, as it would avoid misstatements in valuation of the assets potentially arising from deviations in pricing across the digital asset market, and because of the fragmented nature of the digital asset trading ecosystem. As a result, management applied this valuation technique which it determined to be appropriate given the circumstances.
Following the filing of its Form 10, the Sponsor conducted a complete review of its process for determining fair valuation in the presentation of its financial statements and calculation of NAV. In this process, the Sponsor evaluated whether or not the identification of a principal market for each of the Trust’s assets for valuation purposes, during each period for which the Trust created and had audited its financial statements, would have created a material difference in the Trust’s estimated fair value or assets. In conjunction, the Sponsor determined to undertake a change in valuation policy for the fair valuation of cryptocurrencies held in the Trust. As a result, the Sponsor developed a revised process for the determination of a principal market for each asset based on this consideration and disclosed and implemented this change in valuation policy and accounting policy prior to the creation of financial statements for the period ending September 30, 2021. The Blended Bitwise Crypto Asset Price is no longer used for any calculations by the Trust, including NAV Per Share, NAV of the Trust or fair valuations for any Portfolio Crypto Asset.
The process that the Sponsor developed for identifying a principal market (the "Principal Market"), as described in FASB ASC 820-10, which outlines the application of fair value accounting, was to begin by identifying publicly available, well established and reputable cryptocurrency exchanges selected by the Sponsor and its affiliates in their sole discretion, including BitFlyer, Binance, Bitstamp, Bittrex, Coinbase, itBit, Kraken, Gemini, FTX, FTX.US and LMAX, and then calculating, on each valuation period, the highest volume exchange during the 60 minutes prior to 4:00 pm ET for each asset (the "Principal Market Price"). In evaluating the markets that could be considered principal markets, the Trust considered whether or not the specific markets were accessible to the Trust, either directly or through an intermediary, at the end of each period.
In conducting this review, the Sponsor also retroactively applied this process for identifying a principal market to the prior periods of reported financial results, including the fiscal years ended 2018, 2019 and 2020, to determine whether or not any material or significant differences would have resulted from the application of a different valuation policy in the creation of each financial statement (e.g., comparing the fair value prices determined using the existing and previous valuation methodology to the hypothetical fair value prices using an identified principal market for each asset) and to consider whether management’s use of the previous valuation policy would have created any material departures from a valuation policy of identifying a principal market.
The Sponsor’s results conclude that there were no material or significant differences in valuation or to the financial statements as previously presented when using the policy of identifying a principal market described above as compared to the previous valuation methodology for any period since the Trust commenced operations. Included within the net change in unrealized appreciation (depreciation) within the Trust's Statement of Operations for the nine month period ended September 30, 2021 is $
The following provides an overview of the Principal Market and the Principal Market Prices for Portfolio Crypto Assets that comprised the majority of the Trust’s assets for the nine-month period ended September 30, 2022.
Asset |
|
Principal Market Price |
|
|
Principal |
|
Bitcoin (BTC) |
|
$ |
|
|
Coinbase |
|
Ethereum (ETH) |
|
$ |
|
|
FTX |
|
Solana (SOL) |
|
$ |
|
|
FTX.US |
|
Cardano (ADA) |
|
$ |
|
|
Coinbase |
|
Avalanche (AVAX) |
|
$ |
|
|
FTX |
|
Polkadot (DOT) |
|
$ |
|
|
Coinbase |
|
Polygon (MATIC) |
|
$ |
|
|
FTX |
|
Litecoin (LTC) |
|
$ |
|
|
FTX |
|
Cosmos (ATOM) |
|
$ |
|
|
Coinbase |
|
Chainlink (LINK) |
|
$ |
|
|
Coinbase |
|
9
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
3. Fair Value Measurements
The Trust carries its investments at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Fair value investments are not adjusted for transaction costs.
In determining fair value, the Trust uses various valuation approaches. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.
Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. These inputs may include (a) quoted prices for similar assets in active markets, (b) quoted prices for identical or similar assets in markets that are not active, (c) inputs other than quoted prices that are observable for the asset, or (d) inputs derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
The following summarizes the Trust’s assets accounted for at fair value at September 30, 2022.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments in digital assets, at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following summarizes the Trust’s assets accounted for at fair value at December 31, 2021.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments in digital assets, at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
4. Risks and Uncertainties
Digital Assets
Digital assets are loosely regulated and there is no central marketplace for currency exchange. Supply is determined by a computer code, not by a central bank, and prices have been extremely volatile. Digital asset exchanges have been closed due to fraud, failure, or security breaches. Any of the Trust’s assets that reside on an exchange that closes may be lost. At September 30, 2022, digital assets of approximately $
Several factors may affect the price of digital assets, including, but not limited to: supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates, or future regulatory measures (if any) that restrict the trading of digital assets or the use of digital assets as a form of payment. There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will continue to grow.
10
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
Digital Asset Regulation
As digital assets have grown in popularity and market size, various countries and jurisdictions have begun to develop regulations governing the digital assets industry. To the extent that future regulatory actions or policies limit the ability to exchange digital assets or utilize them for payments, the demand for digital assets will be reduced. Furthermore, regulatory actions may limit the ability of end-users to convert digital assets into fiat currency (e.g., U.S. dollars) or use digital assets to pay for goods and services. Such regulatory actions or policies could result in a reduction of demand, and in turn, a decline in the underlying digital asset unit prices.
The effect of any future regulatory change on the Trust or digital assets in general is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Trust’s investments in digital assets.
Custody of Digital Assets
Coinbase Custody Trust Company, LLC (the “Custodian”) serves as the Trust’s Custodian for digital assets for which qualified custody is available. The Custodian is subject to change in the sole discretion of the Sponsor. At September 30, 2022 and December 31, 2021, digital assets of approximately $
Digital Asset Trading is Volatile and Speculative
Digital assets represent a speculative investment and involve a high degree of risk. Prices of digital assets have fluctuated widely for a variety of reasons including uncertainties in government regulation and may continue to experience significant price fluctuations. If digital asset markets continue to be subject to sharp fluctuations, Shareholders may experience losses as the value of the Trust’s investments decline. Even if Shareholders are able to hold their Shares in the Trust for the long-term, their Shares may never generate a profit, since digital asset markets have historically experienced extended periods of flat or declining prices in addition to sharp fluctuations.
Over-the-Counter Transactions
Some of the markets in which the Trust may execute its transactions are “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to credit evaluation and regulatory oversight as are members of “exchange-based” markets. This exposes the Trust to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Trust to suffer a loss. Such “counterparty risk” is accentuated for digital assets where the Trust has concentrated its transactions with a single or small group of counterparties. The Trust is not restricted from dealing with any particular counterparty or from concentrating any or all of its transactions with one counterparty. Moreover, the Trust has no internal credit function that evaluates the creditworthiness of its counterparties. The ability of the Trust to transact business with any one or number of counterparties, the lack of any meaningful and independent evaluation of such counterparty’s financial capabilities and the absence of a regulated market to facilitate settlement may increase the potential for losses by the Trust.
No FDIC or SIPC Protection
The Trust is not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”). Accordingly, deposits or assets held by the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. The Trust’s cryptocurrency custodians do however carry bespoke insurance policies related to the cryptocurrencies over which they provide custody.
The Trust must adapt to technological change in order to secure and safeguard client accounts. While management believes they have developed an appropriate proprietary security system reasonably designed to safeguard the Trust’s digital assets from theft, loss, destruction, or other issues relating to hackers and technological attack, such assessment is based upon known technology and threats. To the extent that the Trust is unable to identify and mitigate or stop new security threats, the Trust’s digital assets may be subject to theft, loss, destruction, or other attack, which could have a negative impact on the performance of the Trust or result in loss of the Trust’s digital assets.
11
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
Risks Associated With a Cryptocurrency Majority Control
Since cryptocurrencies are virtual and transactions in such currencies reside on distributed networks, governance of the underlying distributed network could be adversely altered should any individual or group obtain
Transaction Authentication
As of the date of these financial statements, the transfer of digital currency assets from one party to another typically relies on an authentication process by an outside party known as a miner. In exchange for compensation, the miner will authenticate the transfer of the currency through the solving of a complex algorithm known as a proof of work, or will vouch for the transfer through other means, such as a proof of stake. Effective transfers of and therefore realization of cryptocurrency, digital assets, and tokens are dependent on interactions from these miners or forgers. In the event that there were a shortage of miners to perform this function, that shortage could have an adverse effect on either the fair value or realization of the cryptocurrency assets.
Other Risks
Management continues to evaluate the impact of the ongoing COVID-19 pandemic, including new variant strains of the underlying virus; current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions; and other geopolitical events; as well as adverse developments in the economy, the capital markets and the Blockchain markets, including rising energy costs, inflation and interest rates, in the United States and globally; and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, and global health epidemics. Management has concluded that while it is reasonably possible that these events could have a negative effect on the financial performance and operations of the Trust, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
5. Income Taxes
The Trust is classified as a partnership for U.S. federal income tax purposes. The Trust does not record a provision for U.S. federal, U.S. state, or local income taxes because the Shareholders report their share of the Trust’s income or loss on their income tax returns. The Trust files an income tax return in the U.S. federal jurisdiction and may file income tax returns in various U.S. states and foreign jurisdictions.
The Trust is required to determine whether its tax positions are more likely than not to be sustained on examination by the applicable taxing authority, based on the technical merits of the position. Tax positions not deemed to meet a more likely than not threshold would be recorded as a tax expense in the current year. As of September 30, 2022 and December 31, 2021, the Trust has determined that
6. Shareholders’ Equity
Subscriptions
As of November 18, 2021, the Sponsor to the Trust has closed the acceptance of all subscriptions to the Bitwise 10 Crypto Index Fund, pursuant to its rights under Sections 5 and 6 of the Trust Agreement.
In-Kind Subscriptions
The Sponsor may, at its sole discretion, accept digital assets (“In-Kind Investments”) in lieu of, or in addition to, cash as payment for investment in the Trust. Such In-Kind Investments are valued using the same digital asset prices as per the Trust’s valuation policy at any given valuation date as of 4:00 pm ET on the date of the subscription. As of November 18, 2021, the Sponsor to the Trust has
12
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
closed the acceptance of all subscriptions to the Bitwise 10 Crypto Index Fund, pursuant to its rights under Sections 5 and 6 of the Trust Agreement.
Redemptions
In connection with the Trust seeking approval for the quotation of its Shares on OTCQX, the Trust halted the withdrawal program on October 7, 2020.
Allocation of Profits and Losses
Prior to May 1, 2020, when the dual class structure was eliminated, income or loss (prior to the calculation of the Management Fee (as defined below)) attributable to the Trust was allocated to each Class in proportion to each Class’s capital account balance.
7. Related Party Transactions
The Trust considers the Sponsor, its directors and employees to be related parties of the Trust. In consideration for the management services to be provided to the Trust, the Sponsor will receive from the Trust a management fee (the “Management Fee”) payable monthly, in arrears at a rate of
The Sponsor may, in its discretion, waive, reduce, or rebate the Management Fee with respect to any Shareholder or group of Shareholders (which group may, but need not, include all Shareholders), including affiliates of the Sponsor; provided that such waiver, reduction, or rebate shall not increase the Management Fee payable in respect of any other Shareholder.
For the periods January 1, 2022 to September 30, 2022 and January 1, 2021 to September 30, 2021, the Shareholders were charged Management Fees of $
The Sponsor paid all expenses related to the initial offering, organization and start-up of the Trust and will not seek reimbursement for such amounts. The Sponsor is responsible for all ordinary operating expenses of the Trust, including administrative, custody, legal, audit, insurance, and other operating expenses.
8. Indemnifications
In the normal course of business, the Trust enters into contracts and agreements that contain a variety of representations and warranties and which provide general indemnifications. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. The Trust expects the risk of any future obligation under these indemnifications to be remote.
9. Financial Highlights
The following presents the financial highlights for the three and nine months periods ended September 30, 2022 and 2021.
13
Bitwise 10 Crypto Index Fund
Notes to Comparative Financial Statements (unaudited)
|
|
Three months ended September 30, 2022 |
|
|
Three months ended September 30, 2021 |
|
|
|
Nine months ended September 30, 2022 |
|
|
Nine months ended September 30, 2021 |
|
|
||||
Per Share Performance |
|
Investor Class |
|
|
Investor Class |
|
|
|
Investor Class |
|
|
Investor Class |
|
|
||||
(for a share outstanding throughout the period) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net asset value per share at beginning of period |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net increase (decrease) in Net Assets resulting from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized and change in unrealized Gain (Loss) on investments (1) |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|||
Net investment loss (1) |
|
|
( |
) |
|
|
( |
) |
|
|
|
( |
) |
|
|
( |
) |
|
Net increase (decrease) in Net Assets resulting from |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net asset value per share at end of period |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total return |
|
|
|
% |
|
|
% |
|
|
( |
) |
% |
|
|
% |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ratios to average net asset value(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses |
|
|
|
% |
|
|
% |
|
|
|
% |
|
|
% |
||||
Net investment loss |
|
|
( |
) |
% |
|
( |
) |
% |
|
|
( |
) |
% |
|
( |
) |
% |
Net Assets at end of period |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
||||
Average net assets(3) |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
||||
Portfolio turnover |
|
|
|
% |
|
|
% |
|
|
|
% |
|
|
% |
||||
Total returns are calculated based on the change in value of a share during the period. The total return and the ratios to average net asset value are calculated for each class as a whole. An individual Shareholder’s return and ratios may vary based on the timing of capital transactions. Ratios have been annualized for the periods ended September 30, 2022 and 2021; total returns and portfolio turnover have not been annualized.
10. Subsequent Events
The Sponsor has evaluated subsequent events through November 4, 2022, the date the financial statements were available to be issued, and has determined that there are no subsequent events that require disclosure.
14
1Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our unaudited financial statements and related notes included elsewhere in this Quarterly Report, which have been prepared in accordance with U.S. GAAP. The following discussion may contain forward-looking statements based on assumptions we believe to be reasonable. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those set forth under Part II, Item 1A. Risk Factors in this Quarterly Report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with, and is qualified in its entirety by reference to, our unaudited financial statements and related notes included elsewhere in this Form 10-Q, which have been prepared in accordance with U.S. GAAP. The following discussion may contain forward-looking statements based on current expectations that involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of various factors, including those set forth under “Part II. Item 1A. Risk Factors,” “Statement Regarding Forward-Looking Statements” or in other sections of this Form 10-Q.
Trust Overview
The Trust is a Delaware Statutory Trust that issues units of fractional undivided beneficial interest in the form of shares, which represent ownership in the Trust ("Shares").
The purpose of the Trust is to make it easier for an investor to invest in the cryptocurrency market as a whole, without having to pick specific tokens, manage a portfolio, and constantly monitor ongoing news and developments. Although the Shares are not the exact equivalent of a direct investment in cryptocurrencies, they provide investors with an alternative that constitutes a relatively cost-effective, professionally managed way to participate in cryptocurrency markets. The Trust holds a portfolio of cryptocurrencies, referred to as the Portfolio Crypto Assets.
In furtherance of this objective, the activities of the Trust include (i) issuing Shares in exchange for subscriptions, (ii) selling or buying Portfolio Crypto Assets in connection with monthly rebalancing, (iii) selling Portfolio Crypto Assets as necessary to cover the Management Fee (as defined below) and/or any Organizational Expenses (as defined below), (iv) causing the Sponsor to sell Portfolio Crypto Assets upon any potential future termination of the Trust, and (v) engaging in all administrative and security procedures necessary to accomplish such activities in accordance with the provisions of the Trust Agreement, and the Custodian Agreement (as defined below).
The Trust’s principal investment objective is to invest in a Portfolio of cryptocurrencies that tracks the Bitwise 10 Large Cap Crypto Index (the "Index") as closely as possible with certain exceptions determined by the Sponsor in its sole discretion. In addition, in the event the Portfolio Crypto Assets being held by the Trust present opportunities to generate returns in excess of the Index (for example, airdrops, emissions, forks, or similar network events) the Sponsor may also pursue these incidental opportunities on behalf of the Trust as part of the investment objective if in its sole discretion the Sponsor deems such activities to be possible and prudent. The Trust believes that it has met its principal investment objective for the nine month period ending September 30, 2022, as there was a correlation of 99.99% between the Portfolio Crypto Assets and the assets included in the Index for such period. The Trust is aware that the market price of the Trust’s shares may deviate from the net asset value (“NAV”) of the shares, and the market price may at times be significantly above or below the shares’ NAV. The NAV of the Trust is calculated by summing the assets and liabilities and the NAV Per Share is calculated by dividing the total NAV by the shares outstanding. However, the Trust believes that any such deviation does not affect the Trust’s principal investment objective, as the Trust does not maintain or promote any business objectives related to the market trading price of its shares. Furthermore, under Regulation M, the Trust as issuer of the Shares is not permitted to take any actions that would seek to reconcile the NAV of the Shares and the market price of the Shares, and the Trust would not undertake business objectives that it was legally restricted from achieving.
The Trust and the Sponsor have entered into a limited, non-exclusive, revocable license agreement with Bitwise Index Services, LLC (the “Index Provider”), an affiliate of the Trust that is controlled by the same parent entity as the Sponsor, at no cost to the Trust or the Sponsor allowing the Trust to use the Index as the benchmark index for the Trust (the “License Agreement”).
15
Results of Operations
Financial Information for the Three and Nine Months ended September 30, 2022 and 2021
The following table sets forth statements of operations data for the three and nine months ended September 30, 2022 and 2021.
Statement of Operations (Unaudited)
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management fees |
|
$ |
2,560,173 |
|
|
$ |
5,601,444 |
|
|
$ |
11,255,579 |
|
|
$ |
15,787,719 |
|
Transaction and other fees |
|
|
— |
|
|
|
1,765 |
|
|
|
820 |
|
|
|
2,900 |
|
Total Expenses |
|
|
2,560,173 |
|
|
|
5,603,209 |
|
|
|
11,256,399 |
|
|
|
15,790,619 |
|
Net Investment loss |
|
|
(2,560,173 |
) |
|
|
(5,603,209 |
) |
|
|
(11,256,399 |
) |
|
|
(15,790,619 |
) |
Net realized and change in unrealized gain (loss) on |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized gain (loss) from digital assets |
|
|
(2,472,815 |
) |
|
|
(16,578,868 |
) |
|
|
(11,214,769 |
) |
|
|
(18,281,783 |
) |
Net change in unrealized appreciation (depreciation) |
|
|
36,687,023 |
|
|
|
228,264,339 |
|
|
|
(583,647,744 |
) |
|
|
386,291,060 |
|
Net realized and change in unrealized gain (loss) on investments |
|
|
34,214,208 |
|
|
|
211,685,471 |
|
|
|
(594,862,513 |
) |
|
|
368,009,277 |
|
Net increase (decrease) in Net Assets resulting from |
|
$ |
31,654,035 |
|
|
$ |
206,082,262 |
|
|
$ |
(606,118,912 |
) |
|
$ |
352,218,658 |
|
Comparison of the three-month periods ended September 30, 2022 and 2021
The following provides a discussion of the material items that impacted the Trust’s financial condition during the applicable period:
Management fees
The Sponsor charges the Trust a Management Fee payable monthly, in arrears, in an amount equal to 2.5% per annum (1/12th of 2.5% per month) of the net asset value of the Trust’s assets at the end of each month. Management fees for the three months ended September 30, 2022 were $2,560,173 compared to management fees for the three months ended September 30, 2021 of $5,601,444. These changes were due to a decrease in the Trust’s net asset value due to a decrease in the value of the Portfolio Crypto Assets held by the Trust as a result of the fair market value of the Assets (see “Schedules of Investments” below).
Net realized gain (loss) from digital assets
Net realized loss from digital assets for the three months ended September 30, 2022 was $2,472,815 compared to net realized loss from digital assets for the three months ended September 30, 2021 of $16,578,868. These changes were due to fluctuations in the value of the Portfolio Crypto Assets.
For the three-month period ended September 30, 2022, the Trust recorded net realized losses from sales of Bitcoin and net realized gains from the sales of Ethereum of approximately $1,556,594 and $328,735, respectively, among the gains and losses realized in smaller amounts from the sale of other portfolio crypto assets. These sales were made as a result of rebalancing activity, sales of portfolio crypto assets to raise money to pay the management fee, and general fund management.
For the three-month period ended September 30, 2021, the Trust recorded net realized losses from sales of Bitcoin and Filecoin of approximately $8,101,667 and $6,130,828, respectively, among the gains and losses realized in smaller amounts from the sale of other portfolio crypto assets. These sales were made as a result of rebalancing activity, sales of portfolio crypto assets to raise money to pay the management fee, and general fund management.
Net change in unrealized appreciation (depreciation) from digital assets
Net change in unrealized appreciation from digital assets for the three months ended September 30, 2022 was $36,687,023 compared to net change in unrealized appreciation from digital assets for three months ended September 30, 2021 of $228,264,339. The primary factor for the change was related to an increase in the fair value of the Portfolio Crypto Assets held by the Trust (see “Schedules of Investments” below).
For the three month period ended September 30, 2022 the Trust recorded net unrealized appreciation from digital assets of Bitcoin and Ethereum of approximately $8,567,277 and $24,402,699, respectively, among the unrealized gains and losses in smaller amounts of other portfolio crypto assets.
16
For the three-month period ended September 30, 2021 the Trust recorded net unrealized appreciation from digital assets of Bitcoin and Ethereum of approximately $121,242,999 and $58,307,745, respectively, among the unrealized gains and losses in smaller amounts of other portfolio crypto assets.
Net increase (decrease) in net assets resulting from operations
For the three month period ended September 30, 2022, the Trust recorded a net increase in net assets resulting from operations of $31,654,035, compared to a net increase in net assets resulting from operations of $206,082,262 for the period ended September 30, 2021. The primary factor that impacted 2022 net increase (decrease) in net assets resulting from operations compared to 2021 net increase (decrease) in net assets resulting from operations was a large decrease in net realized gain and change in unrealized gain on investments with a net gain of $34,214,208 in 2022 compared to a net gain of $211,685,471 in 2021. The primary factor for the change was a decrease in the value of the Portfolio Crypto Assets held by the Trust as a result of the fair market value of the Assets (see “Schedules of Investments” below).
Comparison of the nine month periods ended September 30, 2022 and 2021
The following provides a discussion of the material items that impacted the Trust’s financial condition during the applicable periods:
Management fees
The Sponsor charges the Trust a Management Fee payable monthly, in arrears, in an amount equal to 2.5% per annum (1/12th of 2.5% per month) of the net asset value of the Trust’s assets at the end of each month. Management fees for the nine months ended September 30, 2022 were $11,255,579 compared to management fees for the nine months ended September 30, 2021 of $15,787,719. These changes were due to a decrease in the Trust’s net asset value due to an decrease in the value of the Portfolio Crypto Assets held by the Trust as a result of the fair market value of the Assets (see “Schedules of Investments” below) and new Shareholder subscriptions.
Net realized gain (loss) from digital assets
Net realized loss from digital assets for the nine months ended September 30, 2022 was $11,214,766 compared to net realized loss from digital assets for the nine months ended September 30, 2021 of $18,281,783. These changes were due to fluctuations in the value of the Portfolio Crypto Assets.
For the nine month period ended September 30, 2022, the Trust recorded net realized losses from sales of Bitcoin and net realized gains from sales of Ethereum of approximately $2,687,070 and $4,032,051, respectively, among the gains and losses realized in smaller amounts from the sale of other portfolio crypto assets. These sales were made as a result of rebalancing activity, sales of portfolio crypto assets to raise money to pay the management fee, and general fund management.
For the nine month period ended September 30, 2021, the Trust recorded net realized losses from sales of Bitcoin and Filecoin of approximately $12,375,085 and $6,130,828, respectively, among the gains and losses realized in smaller amounts from the sale of other portfolio crypto assets. These sales were made as a result of rebalancing activity, sales of portfolio crypto assets to raise money to pay the management fee, and general fund management.
Net change in unrealized appreciation (depreciation) from digital assets
Net change in unrealized depreciation from digital assets for the nine months ended September 30, 2022 was $583,647,747 compared to net change in unrealized appreciation from digital assets for nine months ended September 30, 2021 of $386,291,060. The primary factor for the change was related to a decrease in the fair value of the Portfolio Crypto Assets held by the Trust (see “Schedules of Investments” below).
For the nine month period ended September 30, 2022 the Trust recorded net unrealized depreciation from digital assets of Bitcoin and Ethereum of approximately $320,431,946 and $180,407,379, respectively, among the unrealized gains and losses in smaller amounts of other portfolio crypto assets.
For the nine month period ended September 30, 2021 the Trust recorded net unrealized appreciation from digital assets of Bitcoin and Ethereum of approximately $173,683,292 and $169,350,034, respectively, among the unrealized gains and losses in smaller amounts of other portfolio crypto assets.
17
Net increase (decrease) in net assets resulting from operations
The Trust’s net decrease in net assets resulting from operations for the nine month period ended September 30, 2022 was $606,118,912 compared to a net increase in net assets resulting from operations of $352,218,658 for the nine month period ended September 30, 2021. The primary factor that impacted 2022 net increase (decrease) in net assets resulting from operations compared to 2021 net increase (decrease) in net assets resulting from operations was a large decrease in net realized and change in unrealized gain on investments with a net loss of $594,862,513 in 2022 compared to a net gain of $368,009,277 in 2021. The primary factors for the change were a decrease in the value of the Portfolio Crypto Assets held by the Trust as a result of the fair market value of the Assets (see “Schedules of Investments” below) and new Shareholder subscriptions.
Management Fee
The Sponsor charges the Trust a Management Fee payable monthly, in arrears, in an amount equal to 2.5% per annum (1/12th of 2.5% per month) of the net asset value of the Trust’s assets at the end of each month.
The Sponsor is responsible for paying for all ordinary administrative and overhead expenses of managing the Trust, including payment of rent, custody charges or flat rate fees for holding the Trust’s assets charged by the Custodian and customary fees and expenses of the Trustee, Administrator and Auditor (including costs incurred for appraisal or valuation expenses associated with the preparation of the Trust’s financial statements, tax returns and other similar reports and excluding indemnification and extraordinary costs). The Sponsor also pays for all expenses associated with the operation of the Trust, including for example, fees associated with quotation of the Shares on the OTCQX, registration with the SEC, and fees associated with retaining and maintaining the Transfer Agent. “Trading commissions” or trading fees paid to trading venues (also known as exchanges) or intermediaries (such as trading technology or digital asset brokerage firms) that assist in trade execution for accessing digital asset liquidity are charged to the Trust and may either be included in the cost of the digital assets acquired by or disposed of by the Trust or may appear as explicit costs in addition to the price of the digital asset. Trading fees and commissions are charged to the Trust and may appear in the financial statements as “Transaction and other fees” in the Financial Statements’ Statement of Operations in the Expenses category or may be included in the cost of the digital assets acquired by the Trust.
There is no ceiling to the Trust’s expenses that the Sponsor will pay. However, the Sponsor retains the right to cause the Trust to pay indemnification and extraordinary expenses, and these Trust expenses are not covered by the Management Fee. The Trust may incur certain extraordinary expenses including, but not limited to, any non-customary costs and expenses including extraordinary costs of the Administrator and Auditor, costs of any litigation or investigation involving Trust activities, and workout and restructuring and indemnification expenses.
Shareholder Subscriptions
As of November 18, 2021, the Sponsor to the Trust has closed the acceptance of all subscriptions to the Bitwise 10 Crypto Index Fund, pursuant to its rights under Sections 5 and 6 of the Trust Agreement. At this time, the Sponsor has no plans to reopen subscriptions to the Bitwise 10 Crypto Index Fund. There were no shareholder subscriptions during the quarter ended September 30, 2022.
Capital Resources and Liquidity
The Trust generally holds only a very small cash balance, and is otherwise fully invested in order to maintain its investment objective of tracking the Index. When selling Portfolio Crypto Assets to pay the Management Fee, the Sponsor endeavors to sell an exact amount of Portfolio Crypto Assets needed in order to pay such expenses in order to minimize the Trust’s holdings of assets other than Portfolio Crypto Assets. As a consequence, the Sponsor expects the Trust will typically have a very small cash balance at each reporting period. Cash may also be held in the Trust after a subscription from Shareholder is funded (or sent to the Trust’s bank account) but not yet invested in Portfolio Crypto Assets, or after a redemption from a redeeming Shareholder has been processed (e.g., by raising cash through the sale of Portfolio Crypto Assets) but not yet paid to the redeeming Shareholder.
As described above, in exchange for the Management Fee, the Sponsor is responsible for payment of almost all of the expenses incurred by the Trust. As a result, the only material ordinary expense of the Trust during the periods covered by this Registration Statement was the Management Fee. The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs.
18
Value of Portfolio Crypto Assets
As described in the Risk Factors set out in our Form 10-K filed with the SEC on March 11, 2022, the prices of the various Portfolio Crypto Assets held by the Trust are subject to extreme volatility. This volatility had a significant impact on the value of the Portfolio Crypto Assets for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 and the year ended December 31, 2021.
As shown below in the “Schedules of Investments,” the decrease in total investments in digital assets from January 1, 2022 to September 30, 2022 was due primarily to a decrease in the value of the Portfolio Crypto Assets and to a lesser extent, by the sale of various Portfolio Crypto Assets to pay the Management Fee.
Shareholder Subscriptions and Redemptions
During the period from January 1, 2022 to September 30, 2022, there were no subscriptions or redemptions of Shares. There were 20,241,947 Shares outstanding as of September 30, 2022.
Schedules of Investments
The following provides details on the Portfolio Crypto Assets that comprise the Trust’s assets.
Nine Months Ended September 30, 2022 and the Twelve Months Ended December 31, 2021
|
|
Bitcoin Cash (BCH) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
12,742.5405 |
|
|
$ |
5,359,895 |
|
Purchases |
|
|
11,811.2544 |
|
|
|
2,358,003 |
|
Sales |
|
|
(24,553.7949 |
) |
|
|
(4,806,221 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(2,546,813 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(364,864 |
) |
Balance at September 30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
Ethereum (ETH) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
78,234.5412 |
|
|
$ |
285,145,344 |
|
Purchases |
|
|
151.1827 |
|
|
|
531,000 |
|
Sales |
|
|
(3,099.2547 |
) |
|
|
(8,552,663 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
4,032,051 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(180,407,379 |
) |
Balance at September 30, 2022 |
|
|
75,286.4692 |
|
|
$ |
100,748,353 |
|
|
|
|
|
|
|
|
||
|
|
Chainlink (LINK) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
314,935.5479 |
|
|
$ |
6,005,821 |
|
Purchases |
|
|
702.9768 |
|
|
|
5,500 |
|
Sales |
|
|
(23,246.8707 |
) |
|
|
(362,500 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(338,745 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(3,109,536 |
) |
Balance at September 30, 2022 |
|
|
292,391.6540 |
|
|
$ |
2,200,540 |
|
|
|
|
|
|
|
|
||
|
|
Bitcoin (BTC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
12,475.6558 |
|
|
$ |
572,231,636 |
|
Purchases |
|
|
28.5586 |
|
|
|
865,512 |
|
Sales |
|
|
(594.5577 |
) |
|
|
(17,971,946 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(2,687,070 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(320,431,946 |
) |
Balance at September 30, 2022 |
|
|
11,909.6567 |
|
|
$ |
232,006,186 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
19
|
|
|
|
|
|
|
||
|
|
Litecoin (LTC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
46,487.4378 |
|
|
$ |
6,697,910 |
|
Purchases |
|
|
85.7293 |
|
|
|
5,500 |
|
Sales |
|
|
(2,096.8698 |
) |
|
|
(214,300 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(162,114 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(3,931,058 |
) |
Balance at September 30, 2022 |
|
|
44,476.2973 |
|
|
$ |
2,395,938 |
|
|
|
|
|
|
|
|
||
|
|
Cardano (ADA) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
22,428,062.5169 |
|
|
$ |
28,941,172 |
|
Purchases |
|
|
1,018,496.8133 |
|
|
|
613,000 |
|
Sales |
|
|
(2,281,715.2020 |
) |
|
|
(2,049,836 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(1,478,790 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(16,903,498 |
) |
Balance at September 30, 2022 |
|
|
21,164,844.1282 |
|
|
$ |
9,122,048 |
|
|
|
|
|
|
|
|
||
|
|
Algorand (ALGO) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
4,208,152.1524 |
|
|
$ |
6,924,935 |
|
Purchases |
|
|
12,540.2930 |
|
|
|
— |
|
Sales |
|
|
(4,220,692.4460 |
) |
|
|
(3,908,361 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(4,116,639 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
1,100,065 |
|
Balance at September 30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
Cosmos (ATOM) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
380,045.6466 |
|
|
|
7,888,000 |
|
Sales |
|
|
(196,898.4226 |
) |
|
|
(2,153,033 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(3,501,467 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
124,521 |
|
Balance at September 30, 2022 |
|
|
183,147.2240 |
|
|
$ |
2,358,021 |
|
|
|
|
|
|
|
|
||
|
|
Polygon (MATIC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
4,647,380.3452 |
|
|
$ |
11,418,613 |
|
Purchases |
|
|
1,122,992.8075 |
|
|
|
828,500 |
|
Sales |
|
|
(468,300.2423 |
) |
|
|
(677,685 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(204,200 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(7,241,626 |
) |
Balance at September 30, 2022 |
|
|
5,302,072.9104 |
|
|
$ |
4,123,602 |
|
|
|
|
|
|
|
|
||
|
|
Solana (SOL) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
204,175.6196 |
|
|
$ |
34,352,548 |
|
Purchases |
|
|
16,198.0587 |
|
|
|
1,336,000 |
|
Sales |
|
|
(1,615.6533 |
) |
|
|
(158,889 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(178,007 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(27,970,209 |
) |
Balance at September 30, 2022 |
|
|
218,758.0250 |
|
|
$ |
7,381,443 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
20
|
|
|
|
|
|
|
||
|
|
Uniswap (UNI) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
30,776.6772 |
|
|
$ |
517,971 |
|
Purchases |
|
|
287,564.1011 |
|
|
|
1,433,500 |
|
Sales |
|
|
(318,340.7783 |
) |
|
|
(2,222,987 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
68,670 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
202,846 |
|
Balance at September 30, 2022 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
Avalanche (AVAX) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
4,851.3970 |
|
|
$ |
519,342 |
|
Purchases |
|
|
174,775.2222 |
|
|
|
18,287,331 |
|
Sales |
|
|
(1,189.4776 |
) |
|
|
(59,138 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(72,974 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(15,599,554 |
) |
Balance at September 30, 2022 |
|
|
178,437.1416 |
|
|
$ |
3,075,007 |
|
|
|
|
|
|
|
|
||
|
|
Polkadot (DOT) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2022 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
718,667.1411 |
|
|
|
13,619,710 |
|
Sales |
|
|
(1,466.6027 |
) |
|
|
(3,000 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(28,740 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(9,115,507 |
) |
Balance at September 30, 2022 |
|
|
717,200.5384 |
|
|
$ |
4,472,463 |
|
|
|
|
|
|
|
|
||
As of September 30, 2022, Bitcoin represented 62.97% of the total Portfolio Crypto Assets held by the Trust, and Ethereum represented 27.35%, while the remaining 9.53% of the Portfolio Crypto Assets were comprised of Chainlink, Litecoin, Cardano, Cosmos, Polygon, Solana, Avalanche and Polkadot.
|
|
Bitcoin (BTC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
10,784.1481 |
|
|
$ |
314,622,646 |
|
Purchases |
|
|
3,375.5931 |
|
|
|
133,881,461 |
|
Sales |
|
|
(1,684.0854 |
) |
|
|
(69,117,975 |
) |
Net realized loss on investment |
|
|
— |
|
|
|
(8,287,493 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
201,132,997 |
|
Balance at December 31, 2021 |
|
|
12,475.6558 |
|
|
$ |
572,231,636 |
|
|
|
|
|
|
|
|
||
|
|
Bitcoin Cash (BCH) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
10,473.1301 |
|
|
$ |
3,580,941 |
|
Purchases |
|
|
3,191.2557 |
|
|
|
1,491,876 |
|
Sales |
|
|
(921.8453 |
) |
|
|
(465,000 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(1,239,749 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
1,991,827 |
|
Balance at December 31, 2021 |
|
|
12,742.5405 |
|
|
$ |
5,359,895 |
|
|
|
|
|
|
|
|
||
|
|
Aave (AAVE) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
9,100.3093 |
|
|
|
2,807,453 |
|
Sales |
|
|
(9,100.309 |
) |
|
|
(2,990,141 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
182,688 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
— |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
21
|
|
|
|
|
|
|
||
|
|
Cosmos (ATOM) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
440,893.7699 |
|
|
|
9,039,284 |
|
Sales |
|
|
(440,893.7699 |
) |
|
|
(10,660,838 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
1,621,554 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
— |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
EOS (EOS) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
538,167.0251 |
|
|
$ |
1,394,797 |
|
Purchases |
|
|
850,154.5864 |
|
|
|
5,520,968 |
|
Sales |
|
|
(1,388,321.6115 |
) |
|
|
(5,994,212 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(1,483,649 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
562,096 |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
Ethereum (ETH) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
60,056.7369 |
|
|
$ |
44,737,962 |
|
Purchases |
|
|
26,509.5107 |
|
|
|
40,689,802 |
|
Sales |
|
|
(8,331.7065 |
) |
|
|
(22,836,676 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
4,596,726 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
217,957,530 |
|
Balance at December 31, 2021 |
|
|
78,234.5412 |
|
|
$ |
285,145,344 |
|
|
|
|
|
|
|
|
||
|
|
Chainlink (LINK) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
198,197.5054 |
|
|
$ |
2,221,197 |
|
Purchases |
|
|
132,409.5218 |
|
|
|
3,104,263 |
|
Sales |
|
|
(15,671.4793 |
) |
|
|
(350,501 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(197,325 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
1,228,187 |
|
Balance at December 31, 2021 |
|
|
314,935.5479 |
|
|
$ |
6,005,821 |
|
|
|
|
|
|
|
|
||
|
|
Uniswap (UNI) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
291,035.0629 |
|
|
|
5,404,677 |
|
Sales |
|
|
(260,258.3857 |
) |
|
|
(4,482,461 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
(201,399 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(202,846 |
) |
Balance at December 31, 2021 |
|
|
30,776.6772 |
|
|
$ |
517,971 |
|
|
|
|
|
|
|
|
||
|
|
Stellar (XLM) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
11,528,862.8879 |
|
|
$ |
1,454,725 |
|
Purchases |
|
|
5,302,871.7523 |
|
|
|
1,672,356 |
|
Sales |
|
|
(16,831,734.6402 |
) |
|
|
(4,636,994 |
) |
Net realized gain/loss on investment |
|
|
— |
|
|
|
943,964 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
565,949 |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
22
|
|
|
|
|
|
|
||
|
|
Litecoin (LTC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
41,163.3951 |
|
|
$ |
5,121,885 |
|
Purchases |
|
|
12,148.3537 |
|
|
|
1,929,049 |
|
Sales |
|
|
(6,824.3110 |
) |
|
|
(896,500 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
(166,782 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
710,258 |
|
Balance at December 31, 2021 |
|
|
46,487.4378 |
|
|
$ |
6,697,910 |
|
|
|
|
|
|
|
|
||
|
|
Tezos (XTZ) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
439,012.4222 |
|
|
$ |
883,392 |
|
Purchases |
|
|
101,543.2320 |
|
|
|
302,482 |
|
Sales |
|
|
(540,555.6542 |
) |
|
|
(1,850,093 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
652,978 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
11,241 |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
Cardano (ADA) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
22,698,896.2268 |
|
|
|
30,896,591 |
|
Sales |
|
|
(270,833.7099 |
) |
|
|
(555,000 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
181,000 |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(1,581,418 |
) |
Balance at December 31, 2021 |
|
|
22,428,062.5169 |
|
|
$ |
28,941,172 |
|
|
|
|
|
|
|
|
||
|
|
Algogrand (ALGO) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
4,208,152.1524 |
|
|
|
8,025,000 |
|
Sales |
|
|
— |
|
|
|
— |
|
Net realized gain on investment |
|
|
— |
|
|
|
— |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
(1,100,064 |
) |
Balance at December 31, 2021 |
|
|
4,208,152.1524 |
|
|
$ |
6,924,935 |
|
|
|
|
|
|
|
|
||
|
|
Polygon (MATIC) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
4,687,598.4165 |
|
|
|
8,817,500 |
|
Sales |
|
|
(40,218.0713 |
) |
|
|
(45,000 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
(30,675 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
2,676,787 |
|
Balance at December 31, 2021 |
|
|
4,647,380.3452 |
|
|
$ |
11,418,613 |
|
|
|
|
|
|
|
|
||
|
|
Filecoin (FIL) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
51,960.8487 |
|
|
|
9,163,965 |
|
Sales |
|
|
(51,960.8487 |
) |
|
|
(3,033,137 |
) |
Net realized gain on investment |
|
|
— |
|
|
|
(6,130,828 |
) |
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
— |
|
Balance at December 31, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
23
|
|
|
|
|
|
|
||
|
|
Avalanche (AVAX) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
4,851.3970 |
|
|
|
— |
|
Sales |
|
|
— |
|
|
|
518,000 |
|
Net realized gain on investment |
|
|
— |
|
|
|
— |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
1,342 |
|
Balance at December 31, 2021 |
|
|
4,851.3970 |
|
|
$ |
519,342 |
|
|
|
|
|
|
|
|
||
|
|
Solana (SOL) |
|
|||||
|
|
Units |
|
|
Fair Value |
|
||
Balance at January 1, 2021 |
|
|
— |
|
|
$ |
— |
|
Purchases |
|
|
204,175.6196 |
|
|
|
8,895,800 |
|
Sales |
|
|
— |
|
|
|
— |
|
Net realized gain on investment |
|
|
— |
|
|
|
— |
|
Net change in unrealized appreciation on investment |
|
|
— |
|
|
|
25,456,748 |
|
Balance at December 31, 2021 |
|
|
204,175.6196 |
|
|
$ |
34,352,548 |
|
As of December 31, 2021, Bitcoin represented 59.72% of the total Portfolio Crypto Assets held by the Trust, and Ethereum represented 29.76%, while the remaining 10.52% of the Portfolio Crypto Assets were comprised of Solana, Cardano, Polygon, Algorand, Litecoin, Chainlink, Bitcoin Cash, Uniswap and Avalanche.
Off-Balance Sheet Arrangements
The Trust is not a party to any off-balance sheet arrangements.
Significant Accounting Policies
Basis of Presentation
The financial statements are expressed in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Trust is an investment company and follows the specialized accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or “Codification”) Topic 946, Financial Services—Investment Companies.
Transactions of digital assets have been accounted for analogizing to existing accounting standards that management believes are appropriate to the circumstances.
Pursuant to the Statement of Cash Flows Topic of the Codification, the Trust qualifies for an exemption from the requirement to provide a statement of cash flows and has elected not to provide a statement of cash flows.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash represents cash deposits held at financial institutions and digital asset exchanges. Cash in a bank deposit account, at times, may exceed U.S. federally insured limits. The Trust has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on such bank deposits.
Investments and Valuation
Calculation of Valuation
24
For all periods through the quarterly period ended September 30, 2021, the NAV Per Share, the NAV of the Trust, and the fair valuations for each Portfolio Crypto Asset were calculated by the Trust’s administrator in reliance on the fair value of each portfolio crypto asset based on the blended average approach for calculating the price of a digital asset (the "Blended Bitwise Crypto Asset Price"), which the Sponsor was responsible for calculating. The Sponsor provided this price to the administrator, and the administrator used this price (multiplied by the Trust’s holdings) for each asset to determine the fair value of the Trust’s assets. The administrator then subtracted the Trust’s liabilities to determine the Trust’s NAV. The administrator then divided this value by the Trust’s shares outstanding in order to determine the NAV per share. As a result of the Sponsor’s responsibility in this regard, any errors, discontinuance or changes in such valuation calculations may have had an adverse effect on the value of the Shares. The Sponsor instituted this valuation policy in order to generate fair value estimates because it determined that such policy was in the best interest of shareholders, as it would avoid misstatements in valuation of the assets potentially arising from deviations in pricing across the digital asset market, and because of the fragmented nature of the digital asset trading ecosystem. As a result, management applied this valuation technique which it determined to be appropriate given the circumstances.
Following the filing of its Form 10, the Sponsor conducted a complete review of its process for determining fair valuation in the presentation of its financial statements and calculation of NAV. In this process, the Sponsor evaluated whether or not the identification of a principal market for each of the Trust’s assets for valuation purposes, during each period for which the Trust created and had audited its financial statements, would have created a material difference in the Trust’s estimated fair value or assets. In conjunction, the Sponsor determined to undertake a change in valuation policy for the fair valuation of cryptocurrencies held in the Trust. As a result, the Sponsor developed a revised process for the determination of a principal market for each asset based on this consideration and implemented this revised process prior to the creation of financial statements for the period ended September 30, 2021. The Blended Bitwise Crypto Asset Price is no longer used for any calculations by the Trust, including NAV Per Share, NAV of the Trust or fair valuations for any Portfolio Crypto Asset.
The process that the Sponsor developed for identifying a principal market (the "Principal Market"), as described in FASB ASC 820-10, which outlines the application of fair value accounting, was to begin by identifying publicly available, well established and reputable cryptocurrency exchanges selected by the Sponsor and its affiliates in their sole discretion, including BitFlyer, Binance, Bitstamp, Bittrex, Coinbase, itBit, Kraken, Gemini, FTX, FTX.US and LMAX, and then calculating, on each valuation period, the highest volume exchange during the 60 minutes prior to 4:00 pm ET for each asset (the "Principal Market Price"). In evaluating the markets that could be considered principal markets, the Trust considered whether or not the specific markets were accessible to the Trust, either directly or through an intermediary, at the end of each period.
In conducting this review, the Sponsor also retroactively applied this process for identifying a principal market to the prior periods of reported financial results, including the fiscal years ended 2018, 2019 and 2020 and for the nine month period ended September 30, 2021, to determine whether or not any material or significant differences would have resulted from the application of a different valuation policy in the creation of each financial statement (e.g., comparing the fair value prices determined using the existing and previous valuation methodology to the hypothetical fair value prices using an identified principal market for each asset) and to consider whether management’s use of the previous valuation policy would have created any material departures from a valuation policy of identifying a principal market.
The Sponsor’s results conclude that there were no material or significant differences in valuation or to the financial statements as previously presented when using the policy of identifying a principal market described above as compared to the previous valuation methodology for any period since the Trust commenced operations, as the average difference in valuation prices was in all cases less than 0.05% or five one hundredths of one percent for each asset for each period measured, and that such differences are determined to be immaterial in all cases by the Sponsor.
The following provides an overview of the Principal Market and the Principal Market Prices for Portfolio Crypto Assets that comprised the majority of the Trust’s assets for the nine month period ended September 30, 2022.
Asset |
|
Principal Market Price |
|
|
Principal |
|
Bitcoin (BTC) |
|
$ |
19,480.51 |
|
|
Coinbase |
Ethereum (ETH) |
|
$ |
1,338.20 |
|
|
FTX |
Solana (SOL) |
|
$ |
33.74 |
|
|
FTX.US |
Cardano (ADA) |
|
$ |
0.43 |
|
|
Coinbase |
Avalanche (AVAX) |
|
$ |
17.23 |
|
|
FTX |
Polkadot (DOT) |
|
$ |
6.24 |
|
|
Coinbase |
Polygon (MATIC) |
|
$ |
0.78 |
|
|
FTX |
Litecoin (LTC) |
|
$ |
53.87 |
|
|
FTX |
Cosmos (ATOM) |
|
$ |
12.88 |
|
|
Coinbase |
Chainlink (LINK) |
|
$ |
7.53 |
|
|
Coinbase |
25
Valuation during the periods presented
During the periods presented, the trust carried its investments at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Fair value investments are not adjusted for transaction costs. The Trust utilized this method for purposes of calculating the Trust’s NAV.
In determining fair value, the Trust uses a single, principal market valuation approach. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs are to be used when available. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access.
Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. These inputs may include (a) quoted prices for similar assets in active markets, (b) quoted prices for identical or similar assets in markets that are not active, (c) inputs other than quoted prices that are observable for the asset, or (d) inputs derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the transaction.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement.
The following summarizes the Trust’s assets accounted for at fair value at September 30, 2022.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments in digital assets, at fair value |
|
$ |
367,883,601 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
367,883,601 |
|
The following summarizes the Trust’s assets accounted for at fair value at December 31, 2021.
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments in digital assets, at fair value |
|
$ |
958,115,187 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
958,115,187 |
|
During the period, all of the Trust’s assets were considered “Level 1” valuations, because the valuations were based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. These inputs may include (a) quoted prices for similar assets in active markets, (b) quoted prices for identical or similar assets in markets that are not active, (c) inputs other than quoted prices that are observable for the asset, or (d) inputs derived principally from or corroborated by observable market data by correlation or other means.
The Trust generally records receipt of a new digital asset created due to a Hard Fork at the time the Hard Fork is effective. The Trust’s methodology for determining effectiveness of the fork is when two or more recognized exchanges quote prices for the forked coin. Some exchanges and custodians do not honor Hard Forks or may honor Hard Forks in the future. In such cases, the Trust will record receipt of the new digital asset at the time two or more recognized exchanges begin quoting prices for the asset. Although the Trust records the asset into its books and records at the time the fork is effective, as described above, the Trust’s custodian may take an extended period of time to make the forked asset available for transfer, and it may never make the forked asset available for transfer, which could lead to either the Trust holding the asset longer than it would otherwise hold the asset (if it was freely transferrable), or a complete write-down in the value of the forked asset. The Trust does not allocate any of the original digital asset’s cost to the new digital asset and recognizes unrealized gains equal to the fair value of the new digital asset received. During the period ended September 30, 2022, there was a hard fork which occurred on the Ethereum blockchain as a result of an upgrade on the blockchain to proof-of-stake technology.
26
There were no Hard Forks during the period that were not initially recognized but were subsequently recognized.
Digital asset transactions are recorded on the trade date. Realized gains and losses from digital asset transactions are determined using the identified cost method. Any change in net unrealized gain or loss is reported in the statement of operations. Commissions and other trading fees are reflected as an adjustment to cost or proceeds at the time of the transaction.
The Trust intermittently receives Airdrops of new digital assets. The use of Airdrops is generally to promote the launch and use of new digital assets by providing a small amount of such new digital assets to the private wallets or exchange accounts that support the new digital asset and that hold existing related digital assets. Unlike Hard Forks, Airdropped digital assets can have substantially different Blockchain technology that has no relation to any existing digital asset, and many Airdrops may be without value. The Trust records receipt of Airdropped digital assets when received if there is value to the Trust in doing so. Digital assets received from Airdrops have no cost basis and the Trust recognizes unrealized gains equal to the fair value of the new digital asset received. There were no Airdrops recognized or not recognized during the period ended September 30, 2022, or the fiscal year ended December 31, 2021, or the fiscal year ended December 31, 2020.
Income Taxes
The Trust is classified as a partnership for U.S. federal income tax purposes. The Trust does not record a provision for U.S. federal, U.S. state or local income taxes because the Shareholders report their share of the Trust’s income or loss on their income tax returns. The Trust files an income tax return in the U.S. federal jurisdiction and may file income tax returns in various U.S. states and foreign jurisdictions.
The Trust is required to determine whether its tax positions are more likely than not to be sustained on examination by the applicable taxing authority, based on the technical merits of the position. Tax positions not deemed to meet a more likely than not threshold would be recorded as a tax expense in the current year. As of September 30, 2022 and December 31, 2021, the Trust has determined that no provision for income taxes is required and no liability for unrecognized tax benefits has been recorded. The Trust does not expect that its assessment related to unrecognized tax benefits will materially change over the next 12 months. However, the Trust’s conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, the nexus of income among various tax jurisdictions; compliance with U.S. federal, U.S. state, and tax laws of jurisdictions in which the Trust operates in; and changes in the administrative practices and precedents of the relevant authorities. The Trust is required to analyze all open tax years. Open tax years are those years that are open for examination by the relevant income taxing authority. As of December 31, 2021, the 2020 and 2019 tax years remain open for examination. There were no examinations in progress at period end.
Financial Instruments with Off-Balance-Sheet Risk
Digital Assets
Digital assets are loosely regulated and there is no central marketplace for currency exchange. Supply is determined by a computer code, not by a central bank, and prices have been extremely volatile. Digital asset exchanges have been closed due to fraud, failure or security breaches. Any of the Trust’s assets that reside on an exchange that shuts down may be lost. At September 30, 2022, digital assets of approximately $697,000 and cash of approximately $1,303,000 reside on exchanges. At December 31, 2021, digital assets of approximately $1,037,000 and cash of $18,44,000 resided on exchanges.
Several factors may affect the price of digital assets, including, but not limited to: supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of digital assets or the use of digital assets as a form of payment. There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will continue to grow.
Digital Asset Regulation
As digital assets have grown in popularity and market size, various countries and jurisdictions have begun to develop regulations governing the digital assets industry. To the extent that future regulatory actions or policies limit the ability to exchange digital assets or utilize them for payments, the demand for digital assets will be reduced. Furthermore, regulatory actions may limit the ability of end-users to convert digital assets into fiat currency (e.g., U.S. dollars) or use digital assets to pay for goods and services. Such regulatory actions or policies would result in a reduction of demand, and in turn, a decline in the underlying digital asset unit prices.
The effect of any future regulatory change on the Trust or digital assets in general is impossible to predict, but such change could be substantial and adverse to the Trust and the value of the Trust’s investments in digital assets.
27
Custody of Digital Assets
The Custodian serves as the Trust’s Custodian for digital assets for which qualified custody is available. The Custodian is subject to change in the sole discretion of the Sponsor. At September 30, 2022 and December 31, 2021, digital assets of approximately $367,187,000 and $957,078,000 are held by the Custodian, respectively.
Digital Asset Trading is Volatile and Speculative
Digital assets represent a speculative investment and involve a high degree of risk. Prices of digital assets have fluctuated widely for a variety of reasons including uncertainties in government regulation and may continue to experience significant price fluctuations. If digital asset markets continue to be subject to sharp fluctuations, Shareholders may experience losses as the value of the Trust’s investments decline. Even if Shareholders are able to hold their Shares in the Trust for the long-term, their Shares may never generate a profit, since digital asset markets have historically experienced extended periods of flat or declining prices, in addition to sharp fluctuations.
Over-the-Counter Transactions
Some of the markets in which the Trust may execute its transactions are “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to credit evaluation and regulatory oversight as are members of “exchange-based” markets. This exposes the Trust to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Trust to suffer a loss. Such “counterparty risk” is accentuated for digital assets where the Trust has concentrated its transactions with a single or small group of counterparties. The Trust is not restricted from dealing with any particular counterparty or from concentrating any or all of its transactions with one counterparty. Moreover, the Trust has no internal credit function that evaluates the creditworthiness of its counterparties. The ability of the Trust to transact business with any one or number of counterparties, the lack of any meaningful and independent evaluation of such counterparty’s financial capabilities and the absence of a regulated market to facilitate settlement may increase the potential for losses by the Trust.
No FDIC or SIPC Protection
The Trust is not a banking institution or otherwise a member of the FDIC or the SIPC. Accordingly, deposits or assets held by the Trust are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. The Trust’s cryptocurrency Custodian does however carry bespoke insurance policies related to the cryptocurrencies over which it provides custody.
The Trust must adapt to technological change in order to secure and safeguard client accounts. While management believes they have developed an appropriate proprietary security system reasonably designed to safeguard the Trust’s digital assets from theft, loss, destruction or other issues relating to hackers and technological attack, such assessment is based upon known technology and threats. To the extent that the Trust is unable to identify and mitigate or stop new security threats, the Trust’s digital assets may be subject to theft, loss, destruction or other attack, which could have a negative impact on the performance of the Trust or result in loss of the Trust’s digital assets.
Risks Associated with a Cryptocurrency Majority Control
Since cryptocurrencies are virtual and transactions in such currencies reside on distributed networks, governance of the underlying distributed network could be adversely altered should any individual or group obtain 51% control of the distributed network. Such control could have a significant adverse effect on either the ownership or value of the cryptocurrency.
Transaction Authentication
As of the date of these financial statements, the transfer of digital currency assets from one party to another typically relies on an authentication process by an outside party known as a Miner. In exchange for compensation, the Miner will authenticate the transfer of the currency through the solving of a complex algorithm known as a proof of work, or will vouch for the transfer through other means, such as a proof of stake. Effective transfers of and therefore realization of cryptocurrency, digital assets and tokens are dependent on interactions from these Miners or forgers. In the event that there were a shortage of Miners to perform this function, that shortage could have an adverse effect on either the fair value or realization of the cryptocurrency assets.
Other Risks
Management continues to evaluate the impact of the ongoing COVID-19 pandemic, including new variant strains of the underlying virus, current or anticipated military conflict, including between Russia and Ukraine, terrorism, sanctions and other geopolitical events as well as adverse developments in the economy, the capital markets and the Blockchain markets, including rising energy costs,
28
inflation and interest rates, in the United States and globally, and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics, and has concluded that while it is reasonably possible that these events could have a negative effect on the financial performance and operations of the Trust, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
29
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Trust Agreement does not authorize the Trustee to borrow for payment of the Trust’s ordinary expenses. The Trust does not engage in transactions in foreign currencies which could expose the Trust or holders of Shares to any foreign currency related market risk. The Trust does not invest in derivative financial instruments and has no foreign operations or long-term debt instruments.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Trust maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Principal Executive Officer and Principal Financial and Accounting Officer of the Sponsor, and to the Board of Directors of the Sponsor, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor, the Sponsor conducted an evaluation of the Trusts disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based on this evaluation, the Principal Executive Officer and the Principal Financial and Accounting Officer of the Sponsor concluded that the Trust’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There was no change in the Trust’s internal controls over financial reporting that occurred during the Trust’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, these internal controls.
30
PART II – OTHER INFORMATION:
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
There have been no material changes to the Risk Factors last reported under Item 1A of the registrant’s annual report on Form 10-K except as noted under Item 1A of the registrant's quarterly report for the period ended September 30, 2022 on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)
The Trust offers the Shares pursuant to Rule 506 of Regulation D under the Securities Act. The Shares offered by the Trust have not been registered under the Securities Act, or any state or other securities laws, and were offered and sold only to “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act, and in compliance with any applicable state or other securities laws.
The table below describes the Shares offered, the Shares sold and the average and range of prices at which the Shares were offered and sold by the Trust. All Shares initially offered and sold by the Trust are restricted securities pursuant to Rule 144 under the Securities Act. Until the Shares sold by the Trust become unrestricted in accordance with Rule 144, the certificates or other documents evidencing the Shares will contain legends stating that the Shares have not been registered under the Securities Act and referring to the restrictions on transferability and sale of the Shares under the Securities Act. Such legends are removed upon Shares becoming unrestricted in accordance with Rule 144.
To date, no Shares, other securities of the Trust, or options to acquire such other securities were issued in exchange for services provided by any person or entity.
As of November 18, 2021, the Sponsor to the Trust has closed the acceptance of all subscriptions to the Bitwise 10 Crypto Index Fund, pursuant to its rights under Sections 5 and 6 of the Trust Agreement.
Period |
Shares |
Shares Sold1 |
|
Number of |
|
Avg. |
|
High |
|
Date |
|
Low |
|
Date |
|
|||||||
January 1, 2021 to |
Unlimited |
|
4,647,510 |
|
|
536 |
|
$ |
34.65 |
|
$ |
51.02 |
|
3/30/21 |
|
$ |
28.82 |
|
1/21/21 |
|
||
April 1, 2021 to |
Unlimited |
|
335,785 |
|
|
192 |
|
$ |
49.03 |
|
$ |
60.39 |
|
5/11/21 |
|
$ |
31.44 |
|
6/22/21 |
|
||
July 1, 2021 to |
Unlimited |
|
40,296 |
|
|
39 |
|
$ |
41.15 |
|
$ |
53.19 |
|
9/2/21 |
|
$ |
28.62 |
|
7/20/21 |
|
||
October 1, 2021 to |
Unlimited |
|
86,116 |
|
|
15 |
|
$ |
62.13 |
|
$ |
68.87 |
|
11/9/21 |
|
$ |
52.36 |
|
10/5/21 |
|
||
January 1, 2022 to |
Unlimited |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
April 1, 2022 to |
Unlimited |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
July 1, 2022 to |
Unlimited |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
31
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
|
|
Exhibit Number
|
Exhibit Description
|
|
|
31.1 |
|
|
|
31.2 |
|
|
|
32.1* |
|
|
|
32.2* |
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
104 |
Cover Page Interactive Data File (Formatted as Inline XBRL and contained in exhibit 101) |
* These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the SEC and are not incorporated by reference in any filing of Bitwise 10 Crypto Index Fund under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filings.
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Bitwise Investment Advisers, LLC as Sponsor of Bitwise 10 Crypto Index Fund (BITW) |
||
|
|
|
By: |
/s/ Hunter Horsley |
|
|
Name: |
Hunter Horsley |
|
Title: |
President (Principal Executive Officer)* |
|
|
|
By: |
/s/ Paul Fusaro |
|
|
Name: |
Paul Fusaro |
|
Title: |
Title: Chief Operating Officer (Principal Financial Officer and Principal Accounting Officer)* |
Date: November 4, 2022
* The Registrant is a trust and the persons are signing in their capacities as officers or directors of Bitwise Investment Advisers, LLC, the Sponsor of the Registrant.
33
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)
AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Hunter Horsley, certify that:
[Signature page follows]
Date: November 4, 2022 |
/s/ Hunter Horsley |
Hunter Horsley * |
President (Principal Executive Officer) |
* The Registrant is a trust and Hunter Horsley is signing in his capacity as Principal Executive Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust.
[Signature Page to SOX 302 Certification]
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO RULE 13a-14(a)
AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Fusaro, certify that:
[Signature page follows]
Date: November 4, 2022 |
/s/ Paul Fusaro |
Paul Fusaro * |
Chief Operating Officer (Principal Financial and Accounting Officer) |
* The Registrant is a trust and Paul Fusaro is signing in his capacity as Principal Financial and Accounting Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust.
[Signature page to SOX 302 Certification]
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bitwise 10 Crypto Index Fund (BITW) (the “Trust”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Hunter Horsley, Principal Executive Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ Hunter Horsley |
Hunter Horsley * |
President (Principal Executive Officer) |
November 4, 2022 |
* The Registrant is a trust and Hunter Horsley is signing in his capacity as Principal Executive Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bitwise 10 Crypto Index Fund (BITW) (the “Trust”) on Form 10-Q for the period ending September 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Fusaro, Principal Financial and Accounting Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
/s/ Paul Fusaro |
Paul Fusaro* |
Chief Operating Officer (Principal Financial and Accounting Officer) November 4, 2022 |
* The Registrant is a trust and Paul Fusaro is signing in his capacity as Principal Financial and Accounting Officer of Bitwise Investment Advisers, LLC, the Sponsor of the Trust.